Investment Fund of the Diocese of Long Island
Presentation to the 140th Annual Convention
November 10-11, 2006
John H. Andren, Jr.
Treasurer
Trustees of the Estate Belonging to the
Diocese of Long Island
Objectives of the Fund
Provide professional investment management to any institution of the Episcopal Diocese of Long Island
Maximize total long-term rate of return with reasonable risk by seeking capital appreciation and current income.
Brief History
2006 marks the 60th anniversary of the Fund
Authorized by 1940 Diocesan Convention
Necessary legislation not passed by Albany until 1946
The “Why’s” of the Present Structure
The stock market debacle of 2000-2002 (dotcom implosion, Enron and friends) pointed out weaknesses in our controls, procedures and allocations
Investment Committee undertook a zero-based review of our policies and our managers, leading to significant changes and to hiring an advisory firm
Responsibility of the Trustees
Approval of Allocations
Approval of Managers
Approval of Dividend Rates
“Where the buck stops”
Advised by Investment Committee
Composed of Trustees and other business professionals
Monitors the performance of the managers
Recommends changes, when appropriate, for approval by the Trustees.
Using an Outside Consultant
Consultant, with extensive databases
Tracks performance of many managers
Is alert to management changes
Is alert to market trends
Fund CharacteristicsQuality professional management of the portfolioFiduciary oversightIndependent of General Funds of the DioceseDiversification among various asset classes and strategiesEnhanced investment structure fully implemented as of 2005Difference between Total Return and Dividend Payout - Total Return is intended to accomplish two goals: provide income and preserve buying power by accounting for inflation. Hence a portion of the total return (currently 3%) is retained in the fund.
Financial Highlightsas of September 30, 2006
$610.06Value per Share
178,054Number of Shares
$108,623,180Shareholders’ Equity
805,200Total Liabilities
$109,428,380Total Assets
More Financial Highlightsas of September 30, 2006
=$8,257,876Total Increase in Net Assets
+2,486,972Capital Transactions
=5,770,904Net Increase from operations
-3,190,161Dividends
+5063,762Change in Unrealized Gains
+2,633,027Realized Gains
-312,730Expenses
$1,577,006Interest & Dividend Income
Performance
Historical
Current
Projected
Fund Performance
The Total Fund posted a gain of 11.7% for the one-year period ended September 30, 2006, surpassing both the S&P 500 Index and the average balanced manager by a notable margin.
The portfolio exhibits strong, relative long-term performance with a five-year return of 9.1% compared to the S&P 500 Index return of 7.0% and the 6.6% return of the median balanced manager.
*Returns are reported net of all fees.
Historical Share Price
Investment FundHistorical Share Price
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
$650
$700
$750
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
2006 Share Price
Investment Fund Share Price 2006
$570
$580
$590
$600
$610
$620
Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Future Performance
Asset Allocation
Goals of the allocation process:
Maximum return consistent with prudent trust management
Reduced dependence on equities
Broadened international scope
Lowered volatility
Consistent returns
Asset AllocationInternational equity managers have outpaced international benchmarks and domestic equity returnsThe real estate securities portfolio increases both diversification and yield The fixed income allocation is maintained within the Fund to minimize volatilityHedge fund of funds are used to add further diversification and provide a low-volatility return enhancement to the fixed income allocation.The fund comprises a wide variety of domestic equity managers covering both large cap value and growth as well as small cap core
Russell/Mellon Trust Fund Endowment Universe
Asset Allocation Comparison
Source: Russell/Mellon Endowment Universe, June 30, 2006
As of June 30, 2006
Diocese of Long Island Current Allocation
Returns
The return to investors has two elements: the amount credited to the accounts and the increase in the value of the shares. This is the total return. It includes all fees and expenses.
Inflation effect
Why is it a concern?
Need to maintain purchasing power
Mandatory consideration in managing trust funds
Common sense says it’s the right thing
Inflation – how do we deal with it
We estimate total return, e.g, 8%
We subtract an inflation factor, using Consumer Price Index as a guide, currently 3%
Expenses historically average .5%
Making the dividend rate 4.5%
Amount Credited vs. Total Return
$19,000-$6,060Difference
$577,000$577$25,0204.50%$5562005
$558,000$558$31,0806.00%$5182004
Total Share Value
Year-end Share Price
Cash Paid Out
Payout Rate
Average share Price
Year
Dividend HistoryShare Change in Dividend Total
Dividend Valuation Share Value Yield ReturnPrior Years Annual Annual Annual Annual
1995 $24.00 $464.96 20.39% 6.21% 26.60%1996 25.38 495.92 6.66% 5.46% 12.12%1997 27.16 558.64 12.65% 5.48% 18.12%1998 30.35 645.12 15.48% 5.43% 20.91%1999 33.80 727.11 12.71% 5.24% 17.95%2000 37.67 632.95 -12.95% 5.18% -7.77%2001 39.32 566.38 -10.52% 6.21% -4.31%2002 37.77 462.98 -18.26% 6.67% -11.59%2003 33.50 532.85 15.09% 7.24% 22.33%2004 30.78 558.18 4.75% 5.78% 10.95%2005 22.99 577.18 3.40% 4.12% 7.76%
Actual Vs. Average Share price
300
350
400
450
500
550
600
650
Dec-0
2
Apr-0
3
Aug-0
3
Dec-0
3
Apr-0
4
Aug-0
4
Dec-0
4
Apr-0
5
Aug-0
5
Dec-0
5
Dolla
rs
Share Price
36 MonthAverage
Actual vs. Average Share Price
300.00
350.00
400.00
450.00
500.00
550.00
600.00
650.00
Oct-03
Jan-0
4
Apr-0
4Ju
l-04
Oct-04
Jan-0
5
Apr-0
5Ju
l-05
Oct-05
Jan-0
6
Apr-0
6Ju
l-06
Dol
lars Share Price
36 MonthAverage
Subscribing to the Fund
Participation in the Fund is open to all Parishes and Diocesan Organizations.
Our charter does not allow us to accept accounts from individuals
Contact the Diocesan Office. Details are in your handouts.